Coca-Cola Flows in Ethiopia, But Drains Foreign Currency

The American soft drink Coca-Cola has become a symbol of Ethiopia's deepening financial troubles. The beverage is flowing again after a brief pause, even though it drains the country's precious foreign exchange reserves.

Truckloads of Coca-Cola began rolling out of the bottling plant in Addis Ababa Friday, ending a nearly two-week Coke-drought. The local bottler had to shut down this month when it became impossible to obtain the hard currency needed for imports such as bottle caps.

With its foreign exchange reserves at a critical low, Ethiopian authorities have been giving priority to necessities like wheat and fuel.

But Coke bottling company spokesman Solomon Shiferaw says government bureaucrats have granted approvals to get the beverage flowing again.

"The flow of foreign currency was not as it was before. We have to wait some time to get the approval but yes we are getting the approvals, we're being supported so we're back in business," Shiferaw said.

Coca-Cola had become a rare commodity in shops across Ethiopia as supplies dried up.

Hotels and restaurants where the soft drink was available suddenly found business booming. One restaurant manager, who asked for anonymity due to fear of reprisal, said drinking Coke is seen by many as a political statement, because the rival Pepsi bottler is owned by a conglomerate with close government ties.

"The people prefer Coca-Cola because of political cases. I observe this. There was election here, and after that the people are diverted to Coca-Cola. Because Coca-Cola is a private company, but the owner of the Pepsi company is very familiar and supporter of the government, and after that people are drinking Coca-Cola," the manager said.

The Coca-Cola shortage is only one symptom of Ethiopia's economic malaise.

The government this week suspended the licenses of the country's six largest coffee exporters and confiscated 17-thousand tons of coffee beans. The action came days after Prime Minister Meles Zenawi said exporters were stockpiling coffee at a time when prices are low. He called the practice 'illegal', and said the government would sell the beans.

Coffee is one of Ethiopia's biggest foreign exchange earners, bringing in half a billion dollars a year, nearly one-third of the country export earnings. Government figures show coffee exports declined 10% over the past eight months.

The International Monetary Fund predicts Ethiopia's economic growth will decline from an estimated 11.6% last year to about 6.5% this year.

Many western economists and lending institutions say one of Ethiopia's biggest problems is its reluctance to abandon government controls and accept free market reforms. Banking and telecommunications are cited as areas where Ethiopia lags far behind.

The World Bank's lead economist for Ethiopia, Deepak Mishra, expresses confidence the old attitudes are changing.

"In some sense I do see some Marxist Leninist rhetoric, but I think on the whole there is a change in the mindset," Mishra said. "To give you an example, there's a group of government officials who recently went to Malaysia and Vietnam to look at the export process, and they came back and submitted a report to the cabinet, and the first thing they said is, without private sectors, we just can't grow."

Mishra says reforming the banking and telecoms sectors could sustain the high growth rates Ethiopia wants, while keeping inflation down, and breaking the country's dependence on foreign assistance. He says most Ethiopian policymakers agree in principle.

The only question is whether to reform now, as westerners advocate, or over a period of years, as the policymakers prefer.